You have been given this probability distribution for the holding period return forKMP stock:State of the EconomyProbabilityHPRBoom0.318%Normal growth0.512%Recession0.2-5%What is the expected standard deviation for KMP stock?2.0%4.05%5.2%8.13%10.4%

To find the expected standard deviation for KMP stock, you first need to calculate the expected…

Answered: You have been given this probability…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Listed below is the return probability distribution associated with the stocks of XYZ Company and the market portfolio under different states of the economy: State Recession Normal Boom 0.00452 O 0.00552 0.00652 Probability O 0.00752 0.4 0.3 0.3 XYZ Return What is the covariance between XYZ return and Market return? -3% 14% 20% Market Return 2% 8% 16%
Consider the following information: Rate of return State of Economy Probability Stock A Stock B Recession 0.30 -40% 6% Normal 0.50 18% 4% Воom 0.20 142% 2% [Note: take full decimal places in the middle steps and round your FINAL answer to 2 decimal places (i.e. S1.23 or 1.23%)] (a) Calculate the expected return for the two Stocks A and B respectively. (in %) (b) Calculate the standard deviation for the two Stocks A and B respectively. (in %) (c) If you have $2 million to invest in a stock portfolio and your goal is to create a portfolio with an expected return of 16.92%, how much money will you invest in Stock A and Stock B respectively? (d) Based on your answer in part (c), calculate the standard deviation for the portfolio. (in %) (e) If enough stocks (i.e. 100 randomly selected stocks) had been included in the portfolio, what happen to the standard deviation for the portfolio? Explain. [within 100 words]
Thank you
Market Equilibrium and Common Stock Growth The required return on the market is 11.5% and the risk free rate is 5.5% APPR Inc. has a beta of 9 and is expected to pay a dividend of $3.00 per share at the end of the current year. Its current stock price is $50 per share. Assume the market is in equilibrium so the required rate of return equals the expected rate of return. Calculate the following Required rate of return of APPR Inc. stock Expected growth rate Dividend yield and capital gain yield b. F
Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return Strong Normal 0.20 0.45 0.35 % 20% 9% Weak What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. 6.65 % What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places. -4% What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.
Read the information for 3 stocks X, Y and Z below. Rate of return when state occurs (For Stock X, Y, and Z) State of Economy Probability of State Stock X Stock Y Stock Z Boom 0.3 0.4 0.45 0.6 Normal 0.5 0.2 0.15 0.08 Recession 0.2 0 -0.3 -0.4 If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answerthe following questions: (a) Calculate the portfolio expected return.(b) Calculate the variance and the standard deviation of the portfolio (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premiumon the portfolio.
Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00% If the current rate on a treasury bill is 4%, what is the risk premium on the stock? (Note: treasury bill rate is generally regarded as risk free rate) Group of answer choices 10.12% 8.14% 14.12% 11.12%
Consider three stocks: Q, R and S Beta STD (annual) Forecast for Nov 2009 Dividend Stock Price Q 0.45 35% $0.50 $45 R 1.45 40% 0 $75 S -0.20 40% $1.00 $20 Use a risk free rate of 2.0% and an expected market return of 9.5%. The market's standard deviation is 18%. Assume that the next dividend will be paid after one year, at t=1. Required: According to CAPM, what is the expected rate of return of each stock?
Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00% What is the expected return for Stock A? Group of answer choices 14.12% 12.14% 15.12% 14.00%
Consider the following expected returns, volatilities, and correlations: Stock Duke Energy Microsoft Wal-Mart Expected Standard Correlation with Correlation with Correlation with Return Duke Energy Deviation 14% 6% 44% 24% 23% 14% 1.0 -1.0 0.0 Microsoft -1.0 1.0 0.7 Wal-Mart 0.0 0.7 1.0 a) Consider a portfolio consisting of only Duke Energy and Microsoft. What is the percentage of your investment (portfolio weight) that you would place in Duke Energy stock to achieve a risk-free investment. b) What are the expected return and volatility of a portfolio that consists of a long position of $10,000 in Wal-Mart and a short position of $2000 in Microsoft? c) What are the expected return and platility of a portfolio that has $3000 invested in Duke Energy, $4000 invested in Microsoft, and $3000 invested in Walmart stock?
calculate the expected return Rate of return State of Economy Probability Stock A Stock B Recession 0.15 1.00% -0.25 Normal 0.55 9.00% 0.15 Boom 0.30 14.00% 0.38
1. Consider the following information State of Economy Probability of State of Economy Rate of Return if State Occurs Stock S Stock T Boom .20 22% 18% Normal .80 15 % 14% i) What is the expected return for stock S? For Stock T? ii) What is the standard deviation for Stock S? For stock T? iii) What is the coefficient of variation for Stock S? For stock T? iv) If you invest 40% of your money in stock S and 60% in stock T, what is the expected return of the portfolio v) Find the return of your portfolio when a) economy is booming and b) economy is normal. vi) What is the standard deviation for your portfolio?

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You have been given this probability distribution for the holding period return for KMP stock: State of the Economy Probability HPR Boom 0.3 18% Normal growth 0.5 12% Recession 0.2 -5% What is the expected standard deviation for KMP stock? 2.0% 4.05% 5.2% 8.13% 10.4%